I am of course bound to implement the Third Circuit's mandate, whether its decisions were made explicitly or implicitly. See Casey v. Planned Parenthood, 14 F.3d 848, 856-57 (3d Cir.), stay denied, 510 U.S. 1309, 114 S. Ct. 909, 127 L. Ed. 2d 352 (1994). Although the language of the statute gives me pause, I conclude for the following reasons that the Third Circuit did not implicitly decide that Sun's nonrenewal was based on the 1987 sale rather than the 1994 lease-expiration.

First, the Third Circuit assured the Patels that they still had "the opportunity to present to the district court their contention that the nonrenewal of their franchise violates § 2802 because the reason given for nonrenewal, the expiration of the underlying lease, was a condition created by the franchisor when it sold the property without offering the franchisee an opportunity to purchase it." See Patel, 63 F.3d at 253. It is hard to understand why the Third Circuit would expect further proceedings in this litigation to center around the lease-expiration defense if it had decided that Sun's nonrenewal was based on the 1987 sale rather than the 1994 lease-expiration. As the Patels assert, if the Third Circuit had made such a determination, the only question left for decision on remand would be whether Sun had made a bona fide offer to the Patels.

Second, I am hesitant to conclude that the Third Circuit decided the crucial question of how to characterize Sun's nonrenewal under the PMPA without any discussion of the issue. Deciding that nonrenewal was based on the sale rather than the lease-expiration would essentially hold that the franchisor may not rely on the lease-expiration defense unless it offered to sell the premises to the franchisee at the time of sale. This is the central issue in the case and a novel question under the PMPA. The complete absence of analysis on such an important issue, in contrast to the detailed analysis set forth in support of its rulings concerning the availability of injunctive relief, suggests that the Third Circuit may not have intended to make any decision about the merits of the case when it determined that § 2805(e) applied.

The PMPA was enacted in response to the problem of arbitrary or discriminatory franchise terminations or nonrenewals. See S. Rep. No. 731, 95th Cong., 2d Sess. 17-19 (1978), reprinted in 1978 U.S.C.C.A.N. 873, 875-77. Congress was concerned that the inequality of bargaining power that often existed between franchisor and franchisee could result in franchise contracts weighted heavily in favor of the franchisor's interests at the expense of the franchisee's interests. See id. at 17, reprinted in 1978 U.S.C.C.A.N. at 876. Specifically, Congress was concerned that franchisors could use their superior bargaining power to obtain contractual provisions permitting termination of the franchise for even the most "technical or minor violations of the contract." See id. at 17-18, reprinted in 1978 U.S.C.C.A.N. at 876. Congress was also concerned about nonrenewal of the franchise upon its expiration, even though nonrenewal did not affect any definite contractual rights as termination did, because through their statements and actions franchisors often fostered expectations among their franchisees that the franchise relationship would be a continuing one. See id. at 18, reprinted in 1978 U.S.C.C.A.N. at 876.

The problem posed by a franchisor's virtually unlimited ability to terminate the franchise or not renew the franchise relationship was that it allowed the franchisor to exercise a coercive influence over the franchisee's marketing policies. Through the constant threat of termination or nonrenewal, a franchisor could compel a franchisee to comply with the franchisor's preferred marketing policies, even if those policies worked against the franchisee's own economic interests. This influence was magnified as the franchise periods became shorter and the renewal intervals more frequent. Thus, Congress perceived the prospect of arbitrary or discriminatory termination or nonrenewal as a problem requiring legislation because it threatened "the independence of the franchisee as a competitive influence in the marketplace." See id. at 17-18, reprinted in 1978 U.S.C.C.A.N. at 876-77.

Accordingly, because Sun has satisfied all of the conditions of the affirmative defense set forth in § 2802(b)(2)(C) and 2802(c)(4), its nonrenewal of the franchise relationship with the Patels in 1994 did not violate § 2802(a)(2) of the PMPA, and I will therefore deny the Patels' Motion for Partial Summary Judgment and grant Sun's Motion for Summary Judgment.

Our website includes the main text of the court's opinion but does not include the
docket number, case citation or footnotes. Upon purchase, docket numbers and/or
citations allow you to research a case further or to use a case in a legal proceeding.
Footnotes (if any) include details of the court's decision.

Buy This Entire Record For
$7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.